The decline in oil prices has increased the importance of reforms to switch the focus of growth from the public sector to the private sector in Saudi Arabia, International Monetary Fund chief has said.
Christine Lagarde, managing director of IMF, in a statement issued at the conclusion of her visit to Saudi Arabia, said: “It is important that the government accelerate reforms that increase the employment of nationals in the private sector and diversify the economy away from oil. Continued reforms to expand employment opportunities for women would also bring more well-educated and motivated workers into the workforce and strengthen growth prospects,” Yahoo reported.
She reiterated the IMF’s readiness to continue to help the authorities through a policy dialogue tailored to the needs and circumstances of the Saudi Arabian economy.
Lagarde also had discussions with Minister of Finance Ibrahim Al-Assaf; Saudi Arabian Monetary Agency (Sama) governor Fahad Almubarak, and Capital Markets Authority (CMA) chairman Mohammed Al-Jadaan.
“We discussed the Saudi Arabian economy, which has performed strongly in recent years, but is now facing the challenge of adjusting to the sharp drop in oil prices,” she said.
“Prudent fiscal management has helped build-up substantial policy buffers over the past decade, but reforms that would put the large fiscal deficit on a firm downward path are needed. The banking sector is in a strong position to weather lower oil prices and weaker growth.
Sama is also continuing to strengthen its regulation and supervision of the financial sector. Nevertheless, the banking system will need to continue to be carefully monitored in the period ahead,” she added.
$275b Shy
The crude exporting countries of the (Persian) Gulf Cooperation Council are expected to lose $275 billion in revenue this year due to falling oil prices, RT quoted Lagarde as saying.
“At the moment, a large share of fiscal and export revenues in the (P)GCC (comprising Bahrain, Kuwait, Oman, Saudi Arabia, Qatar, and the United Arab Emirates) come from oil. With oil prices having declined sharply since mid-2014, export revenues are expected to be nearly $275 billion lower in 2015 than in 2014,” she said, speaking at a meeting in Qatar with the finance ministers and central bank governors of the (P)GCC.
“The fiscal and current account balances in the region are deteriorating sharply, with the fiscal balance projected by the IMF to be a deficit of 12.7% of GDP in 2015,” she added.
With Persian Gulf Arab state economies largely dependent on oil exports; global benchmark Brent has fallen from $115 a barrel in June 2014 to currently below $50 per barrel.
“Growth is also expected to slow, with IMF projection suggesting 3.2% in 2015 and 2.7% in 2016, compared to 3.4% in 2014,” Lagarde added.
